Mining giant Rio Tinto in talks to buy U.S. lithium producer Arcadium

The world’s second-largest miner Rio Tinto expressed interest in acquiring U.S. lithium producer Arcadium, the two companies confirmed in separate statements on Monday.

No financial specifics were disclosed. Rio Tinto said that there is no certainty that any transaction will be agreed to.

Arcadium Lithium’s market value currently stands at $3.31 billion, according to data from LSEG. The company’s Australian-listed shares jumped over 42% in early Monday trade.

If the deal goes through, Rio Tinto would become one of the largest suppliers of lithium, trailing only Albemarle and SQM. Rio would also acquire access to lithium mines and processing plants across four continents. This move comes as mining companies seek to secure essential minerals for the global energy transition.

Lithium prices have been under pressure as a result of Chinese oversupply. Prices of the benchmark 99.2% lithium carbonate have fallen over 20% year-to-date to $10,800 per metric ton, data from FactSet shows. 

Saul Kavonic, head of energy research at MST Marquee, told CNBC that Rio Tinto had been waiting for a lithium downturn in order to pursue M&A that can deliver it a world scale lithium division.

“Arcadium has likely been in Rio Tinto’s crosshairs for years, but lithium prices and valuations were high for a long time,” he said.

“Ultimately, Rio Tinto only wanted to play in the lithium space if they were going to be a top three producer,” he told CNBC via email, adding that the mining giant was struggling to achieve a tier one lithium exposure through organic means, exploration or smaller scale M&A. 

Rio has been encountering significant resistance in Serbia regarding its planned Jadar mine, which Rio believed had the potential to be a “world-class lithium-borates asset.” Residents have consistently urged Belgrade to halt the project over concerns the mining project could pollute the surrounding environment.

In Arcadium’s recent second-quarter results, the company projected a 25% jump in combined lithium hydroxide and lithium carbonate sales volumes for 2024, compared to 2023. The company also asserted its intentions to ramp up production levels in its recent expansions in Argentina.

“It all comes down to what Rio Tinto is willing to pay, and their long term lithium price outlook,” said Kavonic, who surmised that Rio wouldn’t have approached the deal without expectations of having to pay a material premium.

Rio Tinto and Arcadium did not immediately respond to CNBC’s requests for comments.

Other lithium stocks listed in Australia rallied. Liontown Resources rose 12.84%, Mineral Resources added 4.94%, while Pilbara Minerals and IGO traded around 3.11% and 3.71% higher, respectively.